Pound's Uptrend Against New Zealand Dollar Intact

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There is little reason to question the uptrend in the Pound-to-New Zealand Dollar our mid-week technical studies suggest.

The move up and out of the volatile range between 1.79 and 1.82 has reinvigorated the short-term uptrend, which we see extending even higher from here.

A break above the day's 1.8308 highs would confirm an extension higher.

The MACD indicator in the lower pane, which measures momentum, is progressively shadowing the exchange rate higher, indicating the rally has legs.

The Bank of England meeting on Thursday, September 14 could however shake up the charts as it is a high-volatility event.

The higher-than-expected inflation data out on Tuesday helped the Pound rally to fresh highs as it increased the chances the BOE will raise interest rates sooner than previously expected.

Analysts also appear to be favouring a 'hawkish hold' result, which means that although the BOE will not raise interest rates they will start talking about the possibility of raising them in the future.

Polls indicate a tight outcome which in turn creates the kind of uncertainty that currencies dislike.

One issue drawing on market nerves is most parties appear keen instituting reforms at the Reserve Bank of New Zealand (RBNZ) which could weaken the Kiwi should any changes prompt a shift to more accomodative and stimulative monetary policy.

The Labour party, for example, want to widen the RBNZ's mandate to include 'full employment' - this might result in the RBNZ in interest rates staying lower for longer, or even falling.

Meanwhile, the third largest New Zealand First party could be the 'kingmaking' coalition partner of the eventual government, and their hardline on immigration is expected to lower growth, also undermining the Kiwi.

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The New Zealand Dollar has fallen sharply in recent months, making it one of the worst performing developed world currencies in the second-quarter, but strategists at Toronto-based investment bank TD Securities say the rout has gone far enough and the Kiwi currency now offers an attractive "risk/reward" to those brave enough to get behind it.

The New Zealand Dollar could finally be due some respite from the relentless weeks-long sell-off that has now more than reversed a respectable 2018 gain for the Kiwi currency, according to strategists at Morgan Stanley, who argue that current levels are an opportunity for traders to get "tactically bullish".

The New Zealand Dollar rose across the board Monday as markets responded to an easing of tensions between the US and China, following a trade-war-related detente at the weekend, although the latest foreign exchange forecasts from analysts at Rabobank suggest it might not be long before the Kiwi currency resumes its downtrend.